Updated Thursday afternoon, adds Government, PN statements

 

The need for an additional director within the Central Bank of Malta Board arose to ensure that the Board’s composition is not disrupted, the Government said this evening.

It said in a statement that it was very unfortunate that the Opposition chose to extend its campaign to sow doubt through political innuendo into the financial services sector, and in particular by setting its sights on the Central Bank of Malta, which is the country’s own macro-prudential institution.

Former finance minister Tonio Fenech yesterday urged the Government not to undermine the independence of the Central Bank through the creation of two new top positions to accommodate its 'billboard boys'.

The Nationalist Party this evening urged the Government to seek consensus with it on the appointment of a new Deputy Governor and director of the Central Bank of Malta.

The PN was reacting to a Labour Party statement issued after Labour said the PN was being irresponsible.

In its statement, the Government said that all who followed European and international developments were aware that post-financial crisis regulation led to the establishment of an EU-wide Systemic Risk Boardbased in Frankfurt within the European Central Bank’s financial infrastructure, and whose remit is financial stability.

 

One of the repercussions of the crisis is that National Central Banks, especially those in eurozone countries, have been mandated to establish appropriate institutions in their respective countries to link with the ESRB.

 

Given its size however, Malta opted not to establish a new institution, but to  set-up a joint Financial Stability Board instead. This board would bring together the Central Bank of Malta, the Malta Financial Services Authority, and a Deputy-Governor within the Central Bank of Malta - a post which the proposed amendment to the Central Bank Act would bring about, and which would be solely focused on financial stability. Such posts may indeed be found in other financial institutions across Europe, such as the United Kingdom’s Bank of England, France’s Banque de France, and others.

 

The need for an additional director within the Central Bank of Malta Board arose  to ensure that the Board’s composition is not disrupted.

"The public can be assured that the persons who will be appointed to the posts would be the most qualified on the island.

 

"Whilst the above decision was taken by the Government early April, the last five months were spent consulting with the Central Bank, which in turn sought both informal and formal opinions from the European Central Bank on the wording of the proposed amendments.

 

"The Shadow Minster of Finance was kept abreast through receipt of these amendments and relative correspondence. Cordial briefing meetings were also held between him and the Finance Minister," the Government said.

 

It said that the relationship between the Governor and the Finance Minister could not be better.

"In fact, both consult regularly, and work together closely as they have done at several meetings, such as the informal Eurogroup meetings and others with international organisations, including the International Monetary Fund and various rating agencies, both in Malta and in Washington.

 

"It is vitally important that Malta’s financial services industry, which has recently come under attack from our external competitors, is not undermined from within by partisan statements motivated by short-term political advantage.

 

"Tarnishing the reputation of the long-standing Central Bank of Malta will lead to irreparable damage to Malta’s own international reputation," it said.

 

The Nationalist Party this evening urged the government to seek consensus with it on the appointment of a new Deputy Governor and director of the Central Bank of Malta.

The PN was reacting to a Labour Party statement issued after former finance minister Tonio Fenech yesterday urged the government not to undermine the independence of the Central Bank through the creation of two new top position to accommodate its 'billboard boys'. 

The PL said Mr Fenech was being irresponsible, more so when the PN government had appointed one of its former ministers, Josef Bonnici, as Governor. It said that then Opposition leader Joseph Muscat had remained prudent in his attitude so as not to undermine the credibility of the bank.

With the election of the Labour Party to Government, continuity was retained in the administration of this independent institution.

But Mr Fenech was now criticising the appointment of another deputy governor, which post was approved by the European Central Bank.

PN REACTION

In a counter-statement, the PN denied that Prime Minister Joseph Muscat had been prudent regarding the Governor of the Central Bank and his deputy. He had actually sought their resignation, until he was told that that was not possible in terms of the law since the bank was independent of political interference.

Furthermore it was not true that the ECB had approved of another post of Deputy Governor. It simply did not object.

The PN observed that the Labour Party in its statement ignored the fact that the current Governor of the Central Bank had also served with distinction in the European Court of Auditors.

The PN warned that interference in the Central Bank would undermine transparency in the financial services sector and could jeopardise its successes.

It urged the government to seek consensus on the appointment of the new Deputy Governor and a director, and said persons should be nominated for the positions on the basis of their competence.